Each month I have a week where my Option trading activity takes on a life of its own as I review all my positions that have May options as part of the trade. This week those options are expiring so I have been going through my process of planning and executing any adjustments/exits that I want to make.

As I have added managed accounts for clients in recent months, this process becomes even more important to ensure that I exit trades that may be tired – or I look for good spots to adjust existing positions.

I have made a lot of adjustments this week and here is what I have left to address:

Personal Accounts

• $DDD I am long stock and short the May 50 Call (earlier Blog post with more detail on this one). This is currently OTM so it has a chance to expire worthless, let me keep premium collected
• $OSTK I am short stock and long the May 25 Call so I need to get value from it this week or move to a June strike
• $TSLA I exited my short stock position earlier (hit a stop) so I am now left with a May 80/90 Risk Reversal. Current bid ask on this is: 1.40/1.40 lol
• All other positions have been moved to May 24 weekly or June (or beyond)

Earnings

There are no current earnings trades with May options

Fab 5

$ACT I am long stock with a May 115/105 Collar. Price is above 115 level so I need to decide if I will let it get called away or move to a June collar. Given it has already achieved the Complete status I will likely let this position get closed for me

Clients

• $ADBE I am long the June/May 40 Put Calendar. The May piece is to protect the short June piece so will leave until expiration
• $APO I am long stock with a short May 27.5 Call (Cov Call). I expect these to go poof, keep premium collected
• $ARUN I am short the May 17 Put. I am watching closely, but expect these to go poof, keep premium collected
• $BAC I am long stock and short the May 13 Call so I need to either let it get called or move to next week (or further out)
• $CBS I am short the May 49 Put. I expect these to go poof, keep premium collected
• $IMPV I am short the May 45 Call (part of Call Calendar). I expect these to go poof, keep premium collected
• $MPEL I am short the May 22 Put. I expect these to go poof, keep premium collected
• $SODA I am long stock & short the May 60/57.5 Strangle. Given the short Call is ITM I will need to address this by Friday or the stock will get called away
• $SYMC I am long stock and short the May 25 Call. I expect these to go poof, keep premium collected
• $SYNA I am short the May 37 Put (part of R/R CS). I expect these to go poof, keep premium collected

One of the challenges in trading is in determining an entry for a new stock position (whether it be long or short). There are a variety of methods followed by traders:

• a moving average test
• a horizontal support line test
• a resistance line test
• RSI over-bought or over-sold breach (70 or 30)

The above are just a few of the many triggers that could be used.

When a stock is “extended” – meaning price has moved away from a moving average like the 50 SMA – or a base it has built – the most logical approach is to look for a short entry. To illustrate how this works, I bring you the weekly chart of $AMCX that shows how an RSI trigger in the past would have worked for those that shorted it:

This 1st perspective is just to show a Rising Channel that has formed since 2010. Now I will add some boxes to show prior RSI O/B areas where a short would have been initiated:

The boxes show the areas where the RSI trigger would have got you in short. You would use whatever Stop settings as part of your trading plan. I have also noted here how the MACD has got extended as well. One reminder here, over-bought can stay over-bought for a while so that is always important to keep in mind.

Up to this point, this looks like the higher probability trade is to start a short. This could be a simple short on stock, it could be the purchase of Puts or a Put Spread, and could even include a Short Call or Short Call Spread trade.

Now to really mix up the thinking here. Here is a PnF chart:

Oh boy. By changing the lens here you can see that this had a TT B/O on 3/15 and has a Bullish PO of 90.

Options are thinly traded and have wide strikes so it is hard to recommend any particular trade. Here are a few ideas if you trade with wider stops:

• Go long the stock here and buy the May 60 Put (current bid/ask is 1.35/1.65). If the trade goes in your direction, find a good stall spot to sell premium against your position to recoup some (or all) of the cost for the Put.
• Go short the stock here and buy the May 65 Call (current bid/ask is 1.75/2.05). If the trade goes in your direction, find a good stall spot to sell premium against your position to recoup some (or all) of the cost for the Call.

No new positions added this week to my personal accounts. A few modifications on the Option pieces though:
$FTNT covered call for March ($24)
$SPRD covered call for March ($16)
$AIG covered call moved to March 01 weekly 38.5
$DVA March 120/115/105 Collar

I have been monitoring the $VMW Option chains – looking to put on a new long position for a Gap Fill play – and noticed heavy activity at the 80 Call strike:

Here is where the OI (Open Interest) currently stands for $AAPL:

No new changes this week to the Fab 5 as I am still traveling.

$MON closed at 96.11
$ORLY closed at 91.65

Did some trading this morning. Current new positions from today: U-turn L in $GPS , $FDO CS , $HLF Diag CS

Changes from prior week:
Closed
$HLF
$GRPN 2012 short

New
$SVXY (short the January 62 straddle)

Light trading this week and made no additions to the basket. Existing positions remain: $MON $ORLY